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Damages awarded in legal malpractice case

A lawyer who faced off against LawPPRO in a recent legal malpractice case says the insurer was looking for a legal precedent and ultimately failed at obtaining it.

Mark Arnold questions LawPRO’s motivations for defending an Ontario Court of Appeal case to the extent it did.

The Ontario Court of Appeal recently ruled on the case — Jarbeau v. McLean — and rejected arguments by LawPRO lawyers that damages in the claim should be determined through lost chance.

The lost chance analysis is a basis for assessing damages in which if a lawyer fails to bring a lawsuit within a limitation period, the plaintiff loses the opportunity to sue the original defendant.

This limits damages to the value of the chance that was lost, ultimately reducing the amount paid out. In this case, the Court of Appeal found this did not apply to the Jarbeau case.

Mark Arnold, the lawyer who represented the plaintiffs, questioned LawPRO’s motivations for defending the case to the extent it did, and he says he believes the insurer was asking for a precedent.

“I think what LawPRO was trying to establish was to have all lawyers’ negligence claims looked at by the courts through the filter of lost chance.

“And if they had succeeded in that, the amount of money LawPRO would have to pay out would always be less than 100 per cent,” he says.

Arnold says LawPRO had little chance of succeeding in the case and noted that the plaintiffs offered to settle the case multiple times, including an offer for $175,000 plus costs about one month before trial.

LawPRO will now likely be looking at a bill that could exceed more than $1 million once costs of the appeal are determined. “It is utterly astonishing that LawPRO didn’t settle the case at the earliest possible moment,” Arnold says.

A spokeswoman for LawPRO said she was unable to comment “on matters that are in litigation.” In the case, lawyer Ian McLean was sued by former clients — Darren and Lilian Jarbeau — who had retained him to represent them in lawsuits against those responsible for a faulty home they had built in North Bay, Ont.

McLean then sued the City of North Bay, Tarion Warranty Corporation and the builder, Thermolith Homes Limited, but he failed to sue the engineer within a limitations period, leading to the negligence claim against him. On the eve of the trial, McLean admitted he was negligent in failing to sue the engineer.

The case, therefore, turned on a trial within a trial that determined whether the engineer was negligent.

The engineer then admitted he was negligent in the proceedings and the jury verdict was in the Jarbeaus’ favour.

In their appeal, the defendants’ lawyers argued that the trial judge erred in his instructions to the jury on causation and that he should have structured the plaintiff’s claim as one for the loss of the chance to successfully sue the engineer or have him at the settlement table.

They contended that this chance should have necessarily been valued at less than 100 per cent, as it was hypothetical.

The Court of Appeal, however, rejected that argument, saying the defendants’ submission misunderstood the nature of the Jarbeaus’ claim.

The court determined that the “but for” test set out in the charge to the jury was the appropriate test for causation, and that but for the negligence of McLean, the plaintiffs would have avoided the loss and should be fully compensated for it.

“In this case, the Jarbeaus were entitled to frame their case on an all-or-nothing basis by asserting that the engineer was negligent, and that they would have made full recovery had the engineer been sued,” Justice Gladys Pardu wrote.

The court dismissed McLean’s appeal and allowed the plaintiffs’ cross appeal, which requested the damages be the cost to repair — $433,000 — rather than the $265,000 for which the trial judge opted, which was the diminution in value of the home.

The court decided not to subtract the $75,000 obtained through the original claim as a good chunk of it went to legal fees and the rest went to repairing the Jarbeaus’ roof.

The court also bumped the costs award for the trial up to $231,000.

Bryan Rumble, a lawyer who represents plaintiffs in legal malpractice claims, says the decision could make it easier for plaintiffs to recover damages in such cases.

“From our perspective, it made it easier for plaintiffs in solicitors’ negligence cases to prove damages.

“It may have increased the value of the damages, too,” says Rumble, a partner with Falconeri Munro Tucci LLP, who was not involved in the case.

Rumble says he agrees with Arnold’s assertion that LawPRO was looking to establish a precedent.

“It means that, in certain circumstances, they’re going to have to pay 100 cents on the dollar for damages as opposed to this loss of chance, which would be necessarily less than 100 cents on the dollar of what the claim is worth,” he says of the decision.

The lawyers representing McLean on the appeal, as well as his trial counsel, declined to comment.

Insurance companies may want to rethink the wording of their consumer-facing policies after the Court of Appeal for Ontario restored a class action by life insurance policy holders against their insurers, according to a Toronto lawyer.

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